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Quantifying Reduced-Form Evidence on Collateral Constraints

Author

Listed:
  • Sylvain Catherine

    (University of Pennsylvania)

  • Thomas Chaney

    (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique)

  • Zongbo Huang

    (CUHK - The Chinese University of Hong Kong [Hong Kong])

  • David Sraer

    (Princeton University)

  • David Thesmar

    (HEC Lausanne - Faculté des Hautes Etudes Commerciales (HEC Lausanne))

Abstract

While a mature literature shows that credit constraints causally affect firm level investment, this literature provides little guidance to quantify the economic effects implied by these findings. Our paper attempts to fill this gap in two ways. First, we use a structural model of firm dynamics with collateral constraints, and estimate the model to match the firm-level sensitivity of investment to collateral values. We estimate that firms can only pledge about 19% of their collateral value. Second, we embed this model in a general equilibrium framework and estimate that, relative to first-best, collateral constraints are responsible for 11% output losses.

Suggested Citation

  • Sylvain Catherine & Thomas Chaney & Zongbo Huang & David Sraer & David Thesmar, 2018. "Quantifying Reduced-Form Evidence on Collateral Constraints," Working Papers hal-03393129, HAL.
    • Handle: RePEc:hal:wpaper:hal-03393129
    Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-03393129
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    6. Campello, Murillo & Connolly, Robert A. & Kankanhalli, Gaurav & Steiner, Eva, 2022. "Do real estate values boost corporate borrowing? Evidence from contract-level data," Journal of Financial Economics, Elsevier, vol. 144(2), pages 611-644.
    7. Bahaj, Saleem Abubakr & Foulis, Angus & Pinter, Gabor & Surico, Paolo, 2018. "Employment and the collateral channel of monetary policy," LSE Research Online Documents on Economics 100934, London School of Economics and Political Science, LSE Library.
    8. Aydin, Deniz & Kim, Olivia S., 2024. "Precautionary Debt Capacity," EconStor Preprints 281672, ZBW - Leibniz Information Centre for Economics.
    9. Matray, Adrien, 2020. "Misallocation and Capital Market Integration: Evidence From India," CEPR Discussion Papers 14282, C.E.P.R. Discussion Papers.
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